Michael G. Branson Edited by 
Cliff Auerswald 4 commentsBy Michael G. Branson Edited by Cliff Auerswald 4 comments
Reverse mortgages have been through many changes in their short, 57-year (depending on who you ask) lifespan. As the story goes, a small, local bank wrote the first reverse mortgage in 1961 to a woman in Portland, Maine. The bank owner wanted to help the wife of his high school football coach stay in her home after her husband passed away.
From there, the product took off and continues to help more older Americans remain in their homes as they age.
It wasn’t until 1969 that the reverse mortgage concept was brought to the Senate Committee on Aging. Yung Ping Chen , a professor from UCLA, was the one to share his support of the product that would allow homeowners to tap into their equity to stay in their homes as they aged. The committee was intrigued by the idea.
The first proposal , approved by the Senate, was in 1983 and was brought by former Senator John Heinz. This proposal made the reverse mortgage product insured by the Federal Housing Administration (FHA).
Then, in 1984, American Homestead presented the Century Plan, which was somewhat of a baseline for reverse mortgages insured by the government.
In 1987, a bill was passed by Congress called the Home Equity Conversion Mortgage Demonstration. It was the pilot program that insures reverse mortgages.
Following the pilot program, President Ronald Reagan signed the reverse mortgage bill into law in 1988, and HUD gained the right to insure reverse mortgages through FHA. The first FHA-insured Home Equity Conversion Mortgage (HECM) was issued to a woman in Kansas in 1989.
The first set of regulations came in 1994 when Congress required lenders to disclose the total annual loan costs to borrowers at the beginning of the application process. Then, in 1996, the program changed to allow residences with up to four units to apply for a reverse mortgage as long as the borrower occupies one unit as their primary residence.
The HECM program was officially deemed permanent in 1998 with the HUD Appropriations Act. Some safeguards were also implemented at this time, such as full disclosure fees, to protect borrowers from unnecessary charges.
As the new millennium kicked in, HUD announced that there would be an increase in origination fees for reverse mortgages. It was changed to either 2% of the maximum claim amount or $2,000.
In 2001, HUD partnered with AARP to start testing and training approved reverse mortgage counselors and establish HECM counseling policies and procedures. The following significant change to the HECM program came in 2004 when FHA added rules about refinancing HECMs. Then, in 2005, HECM refinances were made legal.
The establishment of a loan limit came in 2006. At this time, the limit was $417,000. Then, the first group of Baby Boomers started turning 62 in 2008, when someone could apply for a reverse mortgage. In 2009, the HECM for Purchase was introduced, and Congress increased the HECM loan limit to the current limit of $1,149,825 .
Between 2010 and today, several changes were made to improve the HECM product; the recession left many people skeptical of how and if a HECM could protect them as they age. Among the changes:
Additional Resources:
Michael G. Branson CEO, All Reverse Mortgage, Inc. and moderator of ARLO™ has 45 years of experience in the mortgage banking industry. He has devoted the past 19 years to reverse mortgages exclusively.
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4 Comments on this Article| Tina Taylor January 19th, 2019 |
If we had a HECM Reverse Mortgage in 2010 and, we got lump sum. Husband got sick could not live alone and had to move out. We tried to sell for six months but no luck. Gave back and they sold in auction and gave one year period to buy back and we did not so buyer moved in. That was that.
Now on FHA it says HUD loan pd in full but bank says it's a foreclosure and it's not cause HUD gave him a number for qualify. What can we do. Thanks for letting me share!!
 | Michael Branson January 22nd, 2019 |
I'm not sure which part you are disputing. The lender did have to foreclose on the loan, and they sold the property. It sounds like HUD may have had to step in and pay a claim and then subsequently sold the property to another party. This was why you paid mortgage insurance, so that HUD would step in and pay that claim on your behalf and the lender would not seek any recourse from you personally to repay the obligation but that does not change the fact that the loan was foreclosed.
Are you trying to qualify for another HUD loan or to get the bank to change their designation of the loan status? HUD will not insure another loan if there was a loss on the first reverse mortgage unless that loss has been repaid. The lender will not change their loan status because even though you were never forced to pay for the foreclosure, the loan did ultimately end in a foreclosure action and the public records you describe (the foreclosure and the equity right of redemption) are all recorded documents. I'm not aware of any action you can take to erase the information now.
| Pam June 7th, 2018 |
